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Audit Report: IG-0870

September 26, 2012

Follow-up Audit of the National Nuclear Security Administration's W76 Nuclear Warhead Refurbishment Program

The National Nuclear Security Administration (NNSA) is refurbishing the aging W76 nuclear warhead with the goal of extending the warhead life by 30 years.However, the W76 Life Extension Program (LEP) has experienced significant delays in startup and in achieving production goals.NNSA may be unable to complete the W76 LEP within established scope, cost and schedule parameters, unless it adopts a more effective approach to reducing unit costs.This concern is exacerbated by the fact that the Program is faced with a relatively flat budget over the next few years, even though its annual scope of work is projected to increase significantly.The Program's budget increases for Fiscal Years (FY) 2013 and 2014, for example, are projected to be only 2.9 percent in each year more than FY 2011 levels.The Program's production schedule, however, shows production increasing 59 percent during the same period.The increase in production appears to be unsustainable given the projected funding.The goal of reducing the unit cost of W76 LEP production appeared to be one of the only paths to keeping the Program on track without adversely affecting other NNSA programs.Although a senior NNSA official expressed confidence that NNSA would achieve the increased production rates within the out-year budget estimates, Program officials could not provide plans detailing actions necessary to achieve the needed cost reductions.Although Program officials disagreed with our methodology for calculating unit cost, in general, they agreed that our analysis, including the risks going forward, were consistent with NNSA's concerns about Program execution in future years.